But like with Toys R Us, employees of the soon-to-be-defunct company made public their issues with their private equity owners. And late last week, about 700 Shopko employees reportedly wrote an open letter with nonprofit labor union United for Respect to former Shopko owner Sun Capital Partners. The gist: They want the private equity firm to set up a fund for workers who lost their jobs after the company announced in March that it would close its remaining stores. The Wisconsin-based retailer is expected to shutter its final locations by June 23.
The strategy worked to a degree for former Toys R Us employees, which received a $20 million compensation fund from former owners Bain Capital and KKR last November to make up for unpaid severance. The workers were seeking $75 million, but creditors Angelo Gordon and Solus Alternative Investment declined to contribute to the vehicle after opting to liquidate operations.
Meanwhile, the Shopko closure comes some 14 years after Sun Capital took the company private for roughly $1.1 billion in 2005. The Florida-based buyout shop then engineered a sale-leaseback the next year, effectively saddling the company with more debt while the PE firm earned money off the subsequent rent payments. From 2007 to 2015, the firm scored nearly $180 million in dividends, according to Bloomberg. And a recent state investigation from the Chapter 11 proceedings found the company wasn't paying sales tax while it way paying out some of those dividends. A claim filed by The Wisconsin Department of Revenue has said it owes the state $13.5 million.
In other words, Sun Capital made money on a company which ultimately went bust, allegedly stiffed the state on a good chunk of tax revenue and chose to close all 300-plus locations, which provided about 14,000 jobs. And management reportedly offered severance to employees who kept working until the stores were shut down, before pulling that offer. That behavior won't go unnoticed.
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